The Cyclical Behaviour of Fiscal Surpluses in The OECD Countries – A Panel Study
The main objective of this paper is to examine differences in the cyclical behaviour of fiscal policy in the OECD countries empirically using a new method developed to compare directly the explanatory power of two groups of theories that try to explain why some countries run pro-cyclical fiscal policies. The analysis shows that stronger anticyclical fiscal policies are typically run by countries with better institutions, lower deficits, and a lower stock of public debt. However, the index of regulatory quality performs best in explaining the variance of output elasticity of budget surpluses, which contradicts the conventional view that financial constraints are the main reason behind fiscal procyclicality.
|Date of creation:||Jan 2006|
|Date of revision:||Jul 2006|
|Contact details of provider:|| Web page: http://www.ke.uni.lodz.pl|
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